Storage is an important marketing and risk management tool that allows producers to extend the marketing interval and avoid seasonal low prices at harvest.

As harvest rapidly approaches, producers will need to determine the amount of production that can be stored on-farm or in commercial storage and which commodities to store if limited space is available.

Looking at current futures market price spreads provides an indication of whether the futures market is incentivizing storing corn or soybeans (Table 1 and 2).

To compare the benefit of storage between commodities, we can look at the spread between the nearby and deferred futures contracts and the interest cost associated with carrying the commodity for sale at a later date.

Interest rate

In this analysis, the interest rate is assumed to be 8.0%. This results in a monthly interest cost of $0.026 per bushel ($3.83 per bushel x 8% x 1/12 months) for corn and $0.067 per bushel, per month ($10.08 per bushel x 8% x 1/12 months) for soybeans. 

Comparing the May futures contract and interest cost for corn and soybeans indicates a benefit to storing corn over soybeans.

The futures market spread between the September and May corn contract is $0.46per bushel ($4.29 per bushel – $3.83 per bushel). The interest cost is $0.20 per bushel ($0.026 per bushel per month x 8 months).

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The spread less interest is $0.26 per bushel.  For soybeans, the September and May spread is $0.54 per bushel ($10.62 per bushel – $10.08 per bushel) with an interest cost of $0.54 per bushel ($0.067 per bushel/month, times eight months).

This results in a soybean spread less interest of $0.00 per bushel. Examining other deferred contract months provides a similar result. Thus, the futures market is indicating a stronger incentive to store corn than soybeans.

It is important to note that this analysis does not include changes in basis, which will vary by location and could change the storage preference between commodities.

Source: Southern Ag Today, a collaboration of economists from 13 Southern universities.